chapter 11 marketing Flashcards
Physical distribution
refers to activities that move
finished goods from manufacturers to final customers
including order processing, warehousing, materials
handling, transportation, and inventory control.
channel of distribution
is a series of firms or
individuals that facilitates the movement of a product from
a producer to a final consumer.
Direct channels
from producer to end customer
– Indirect channels
include intermediaries or middlemen
Distribution Channel Functions
Breaking bulk
Creating assortments
Transportation and storage
Breaking bulk
Dividing larger quantities of goods into
smaller lots to meet the needs of buyers.
Creating assortments
Provide variety of products in one
location, so customers can conveniently buy many
different items from one seller.
Transportation and storage
Occurs when retailers and
other channel members move the goods from the
production point to other locations where they can hold
them until consumers want them.
Facilitating functions
Make the purchase process easier
for customers and manufacturers (e.g., offering credit to
buyers).
Risk taking
Chance retailers take when they buy a
product from a manufacturer, as the product might just sit
on the shelf if no customers want it.
Communication and transaction
When channel
members develop and execute both promotional and other
types of communication among members of the channel.
Key Types of Intermediaries
independent Intermediaries
Manufacturer-Owned Intermediaries
independent Intermediaries
Merchant Wholesalers
Merchandise Agents or Brokers
Merchant Wholesalers
• Full-service merchant wholesalers • Limited-service merchant wholesalers – Cash-and-carry wholesalers – Truck jobbers – Drop shippers – Mail-order wholesalers – Rack jobbers
Merchandise Agents or Brokers
Agents and brokers provide services in exchange for
commissions but never take title to the product.
– Manufacturer’s agents
– Selling agents
– Commission agents
– Merchandise brokers
Manufacturer-Owned Intermediaries
Producers may set up their own channel intermediaries.
• Perform functions of independent intermediaries while
maintaining control:
– Sales branches
– Sales offices
– Manufacturer’s showrooms
– Slotting allowances
are fees paid by producers to
large retailers for access to premium shelf space.
Product diversion
is the distribution of a product
through one or more channels not authorized for use
by the manufacturer of the product.
Steps in Distribution Planning
Step 1: Develop Distribution Objectives Step 2: Evaluate Internal and External Environmental Influences Step 3: Choose a Distribution Strategy step 4: develop distribution tactics
Step 1: Develop Distribution Objectives
Objectives must support overall marketing goals.
– How does distribution work with the other marketing
mix elements to increase sales, profits, or market
share?
– Specific objectives may depend on nature of the
product (e.g., if product is heavy, a key goal may be to
minimize shipping costs).
Step 2: Evaluate Internal and External
Environmental Influences
• What are relevant internal and external environmental influences? • How can these factors be used or minimized in developing the best channel structure?
Step 3: Choose a Distribution
Strategy
* Number of levels • Channel relationship – Conventional – Vertical ▪ Administered VMS ▪ Corporate VMS ▪ Contractual VMS – Horizontal marketing system
step 4: develop distribution tactics
select channel partners manage the channel develop logistics strategies order processing warehousing material handling transportation inventory control
Vertical Marketing Systems (VMS)
• Channel in which there is formal cooperation among
members at two or more levels.
Three types of vertical marketing systems
Administered VMS
Corporate VMS
Contractual VMS
Administered VMS
Independent channel members
work together due to power of a dominant channel
member
Corporate VMS
A single firm owns manufacturing,
wholesaling, and retailing operations
Contractual VMS
Channel member cooperation
enforced by contracts that spell out rights and
responsibilities of each member
Horizontal Marketing System
Two or more firms at the same channel level agree to work
together to get their product to the customer.
– e.g., airline code sharing agreements
Intensive distribution
Maximize coverage by selling
through as many outlets as possible.
Exclusive distribution
Limit distribution to a single
outlet in a particular region.
▪ May create gray markets.
Selective distribution
Seeks to strike a balance
between intensive and exclusive distribution
Step 4: Develop Distribution Tactics
• Distribution tactics relate to two aspects of strategy
implementation:
1. Selecting channel partners
▪ Firms consider economic, competitive, relationship,
and sustainability factors.
2. Managing the channel
Channel Management
The channel leader or channel captain is the dominant
firm that controls the channel.
• Channel power derives from different potential sources:
– Economic power
– Legitimate power
– Coercive power
Logistics and the Supply Chain
Marketing success depends on more than just plans—
implementation is crucial!
– Logistics plays a crucial role in firm efforts to deliver on
their brand’s promise.
Logistics
is the process of designing, managing, and
improving the movement of products through a supply
chain.
supply chain
is all activities needed to turn raw materials
into a product delivered to a customer
